Abstract: This paper presents different conclusions with that in the literature, using three approaches: treating R&D investment and post-innovation output independently, introducing a virtual player to reveal cooperative incentives and eliminating the symmetry of members. The authors find that firms with one of the following characteristics are prone to cooperate: large output in the future , high marginal cost reduction, large degree of risk-averse, strong absorptive capacity, leaders|or that firms facing the following circumstances are likely to cooperate: high spillovers, unserousness in the future competition. All in all, the move of firm's R&D investment must consistent with the direction of its (the alliance's) marginal aggregate cost reduction with spillovers for fixed prospective outputs.

Key words: R&D, cooperation, competition, R&D investment